Center for Rights, Liberties, and Equity

Urban Planning and Alternative Solutions to Drawbacks from Tax Increment Financing (TIF) Districts

 

In March 2021, the Kentucky General Assembly passed House Bill 321 authorizing the creation of a tax increment financing (TIF) district within the West End of Louisville. Designed to spur community-wide economic development, it sets up a public-private nonprofit partnership. Known as the West End Opportunity Partnership (WEOP), this 21-seat board would have sole control over any fund disbursement. Funds can be used towards a broad array of investments including small business loans, financing affordable housing units, home improvements, etc. Once the WEOP board raises $10 million in donations from private-public sources, the state will match another $10 million, and the City of Louisville has already pledged $10 million—bringing the total to $30 million.  

 

Residents within the district have expressed opposition to the TIF, skepticism towards the board, and fears of displacement/gentrification at the prospect of large-scale commercial & residential development. The Historically Black Neighborhood Assembly (a group composed of residents of the West End) has been the biggest driver of opposition. They have led a campaign titled “#StoptheWestEndTIF” that has garnered 425 signatures. State Senator Gerald Neal, HB 321’s leading sponsor, noted that this district is not a panacea to the issues that led to the historic divestment of the West End. However, the truth is that this board of 21 individuals will have full discretion over the projects that will shape West Louisville and its 62,000 residents. 

 

To the bill's credit, this law clearly establishes the purposes of the public-private partnership (i.e. to ensure projects include the employment of area residents, both in short-term construction jobs and long-term employment in businesses locating within the development area, ensure that all housing projects include the creation of housing that is deemed affordable in accordance with federal guidelines for low-income families, and bounds the board to the Kentucky Open Meetings Act to name a few). However, this law also grants the WEOP board sole responsibility for its operations which makes any established purposes tantamount to mere recommendations. The lack of regulative measures that would boost community input & trust within the bill is a clear indicator that there is a need for amendments to this legislation.

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Thus, the CPC Center for Rights, Liberties, and Equity makes the following recommendations to encourage community involvement in dealing with this public entity:

 

Local Level (WEOP Board or City of Louisville) 

• Explore the establishment of reduced/free parking zones found in areas with low-income or areas chosen for affordable housing within the boundaries of the district 

• Work with existing business & homeowners to remedy code violations and facilitate lien releases  

• Expanding the Low-Income Housing Tax Credit (LITECH) program  

 

State Level 

• * Extend refundable tax credit for increases in property taxes above the frozen 2021 rate to renters who make up 60 percent of West Louisville residents 

• * Mandate public hearings upon authorization & final approval for any sites selected by the WEOP board for investment 

• * Any announcements made by the WEOP board relating to development or investment must be in general circulation for a minimum 10-day period 

• * Pursuant to KRS 99.727(5) a tax delinquency diversion program for blighted property within the boundaries of this TIF, for the entire 20-year duration of this district, should take effect 

• Comprehensive disclosure requirements: 

• Prior to the disbursement or use of any funds at the disposal of the WEOP, the board must publicly identify broad targets (I.e., 20-year target) of the desired economic development level and the target impact of the financing plan for the district. (ex. Grow the local equivalent of GDP or commercial revenue by 150%) 

• Once targets are named a study must be conducted which shows the level of gentrification which may spur because of development to that level of impact throughout the district 

• Must then disclose planned actions to reduce gentrification to a justifiably minimal level, including any considerations to apply for local waivers of the land development code to avoid changes in land use 

• Methods for which the gentrified population will either be indirectly compensated (increase in local economic interdependence) or directly compensated (if the indirect benefit is not clear) must be a part of the study 

• The rationale for how they decide an area is being minimally gentrified must be shown to accurately assess whether levels are at a true minimum, maximum, or exceed standards 

• The board should show the disclosures in a single report accessible and readable by the public no less than 185 days (about 6 months) prior to the first investment—excludes preliminary reports from this requirement 

* Note: requires amendments to pre-existing local/state law.  

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